Thursday, November 24, 2011

The 102,000 cupcake Groupon nightmare

Let this be yet another warning to small business owners everywhere: London baker Rachel Brown was recently forced to bake over 100,000 cupcakes for Groupon customers, and ended up losing about $3 on each batch.
--Sarah Jacobsson Purewal, PC World, on losing money on every order but making it up in volume

Need a Cake offered a deal of 12 cupcakes with a choice of flavours and designs for £6.50, which would normally cost £26. It received 8,500 requests as a result, substantially more than its usual production level of about 100 a month.

The company, which employs eight people, had to bring in agency staff to try to meet the upsurge in demand.

Ms Brown estimates the extra costs of staff and distribution could be up to £12,500, wiping out profits for the year.